Does Price Transparency Improve Lab Utilization?

Physicians often have poor awareness of costs. For that reason, many believe that providing cost information to physicians would increase awareness that, in turn, could improve laboratory utilization. For example, costs of lab tests could be displayed as a field in the computerized provider order entry system. Interventions of this type are attractive because they are relatively inexpensive to implement and do not disrupt workflow with popups. Further, unlike other interventions, cost display is sustainable. Some interventions require constant training and followup whereas cost display is a one-time intervention. For these reasons, organizations are experimenting to see the effect of cost display on laboratory utilization.

Does cost display reduce lab utilization? Studies have shown wide variation in impact. Most studies have focused on orders for laboratory testing and imaging; however, a few studies have looked a pharmaceuticals. A recent systematic review concluded that cost display is associated with a modest reduction in laboratory utilization.(1) The review included twelve studies on lab utilization and all of these showed improvement.(2-13) However, a more recent study by Sedrak et al. found that cost-display had no impact on utilization.(14) Similarly, two imaging studies found that cost-display had no effect on orders.(4, 15). There was a wide variation in impact: test utilization reduction ranged from 0% to over 30% in some cases. Overall, it appears that cost display tends to reduce utilization; however, it sometimes has no effect as shown in the Sedrak study. So far, cost display has never been associated with an increase in utilization. We have experimented with cost display at University of Utah and, like the Sedrak study, found no effect.

Why is there such a range of effects? Can we predict which organizations are likely to benefit? The short answer is that nobody knows. The twelve studies on lab utilization where conducted in a wide range of settings (community, academic and pediatric hospitals), included different numbers of tests, or had other differences that could affect results. The way in which costs are displayed also varies. Some sites use the Medicare Maximum Allowable Reimbursement Rate, some use a series of dollar signs to indicate cost categories, and others use charges. It is not clear whether these differences matter.

There are a number of factors that might affect the impact of cost display. For example, cost display might have less impact at an institution that has an effective utilization management program in place because there is less opportunity for improvement. Or, the number of tests with costs displayed may have an impact. For example, some studies have displayed costs for a relatively few number of tests whereas other studies showed costs for a large number of tests. Cost display for a few tests may send a different signal to providers than providing costs for all tests. Also, we don’t know how long the intervention works. Is there an initial effect that wears off? If so, how long does it last? These questions will need to be resolved by future studies.

In the meantime, should you provide cost feedback at your institution? It is hard to predict what will happen but most evidence suggests that you will see some improvement in utilization. It is not expensive to implement and some organizations have seen a significant impact. At worst, the evidence suggests that you will see no effect on testing behavior. On balance, cost-display seems like a low-risk intervention.

-Robert Schmidt, MD, PhD, MBA, MS is a clinical pathologist who specializes in the economic evaluation of medical tests. He is currently an Associate Professor at the University of Utah where he is Medical Director of the clinical laboratory at the Huntsman Cancer Institute and Director of the Center for Effective Medical Testing at ARUP Laboratories.